- There are several funding options for aspiring asphalt contractors.
- It doesn't hurt to prepare a business plan in case you want to apply for financing with traditional lenders.
- Starting an asphalt business with bad credit? Check out your options.
After watching all the Asphalt Kingdom YouTube videos and poring through our blog, you finally decided to start your own asphalt maintenance business.
But there's just one hurdle: you're still looking for a way to fund your business.
If you're looking for options to finance your sealcoating business, then keep on reading. We've listed everything you need to know to obtain funding for your asphalt maintenance business.
Table of Contents
- Ask friends and family for help
- Check with suppliers if they offer financing
- Traditional lenders
- It's good to have a business plan on hand
- Check out equity financing
- Business financing with bad credit
The easiest way to acquire business funding? Family and friends financing
Photo by Karolina Grabowska via Pexels
Don't have enough saved right now to jumpstart your asphalt business? Then try friends and family financing.
All you have to do is approach well-to-do family members and friends and ask them to fund your business partially or fully.
There's no need to jump through so many hoops when you approach family and friends for financial help. Prospective lenders might ask you to prepare a business plan or inquire about your general financial health. But overall, it's easier to ask them to help you reach your dreams.
In some cases, you'll be offered more lenient payment terms and low or zero interest rates. If you're lucky, your friend or family won't even want you to pay the loan.
But keep in mind that things can go south for your business, too, the minute the relationship turns sour. And don't even consider delaying payment or not paying at all even if you have the money and are capable of doing so. Not only will this taint your relationship; but you'll also lose a valuable friend or family member in the process.
Another disadvantage of asking your friends and family to help finance your business is the limited availability of funds. For those who don't have generational wealth to fall back on, the best your friend or family can lend you is a few thousand dollars. But if your startup capital runs in the hundreds of thousands, then it's best to explore other financing options.
Your supplier might be the key to getting funding for your business
As a prospective business owner, your greatest hurdle is the lack of means to fund the equipment essential to run your business.
The good news is you don't have to look very far to get equipment funding. Many equipment suppliers can help you finance new equipment with the help of their partners.
Asphalt Kingdom, for example, has partnered with financing providers, such as Klarna and ClickLease, to help contractors get the sealcoating and crack repair equipment they need with easier payment terms.
If you want to know more about equipment funding, then check out this page for more information. We'll walk you through the application process, as well as the requirements you need to submit to fast-track your way to sealcoating success.
We also have tips to help you get started in the pavement maintenance industry even with a limited budget. Watch it below.
Starting Your Asphalt Maintenance
Banks can fund your asphalt maintenance business but the loan has to be backed by collateral
Small business loans from banks and other traditional lenders are some of the strictest when it comes to requirements. You need to have a good business and personal score, and you have to write a business plan.
You also have to present all your financial documents, such as your resume, income tax returns, bank statements, business license, contracts, resume, financial projections, and more. The list just goes on and on.
But one requirement that might deter many prospective business owners is the collateral.
A collateral is a type of asset that a borrower owns and uses to back a loan. It can be real estate or a piece of equipment or a vehicle. It can also be cash or inventory. The value of the collateral should be at least 75% to 90% of the total loan amount.
Don't have a house, a piece of equipment, or a vehicle to back your business loan?
The good news is it's still possible to get a business loan! Just check if your bank or credit union offers a product called an unsecured business loan.
Because there's no asset to back up an unsecured loan, the lender will evaluate you based on your personal and business credit score.
The bad news? This type of loan is only available to the most qualified borrowers.
A business plan is essential to fund your business
If you're planning to borrow startup capital from a bank, credit union, or other traditional lenders, then creating a business plan is essential. This document is not only your roadmap success. It also gives lenders an idea of your plan for the future, as well as your financials.
So what does a sealcoating business plan contain? It contains the history of your business, as well as your plans to generate revenue for it. It tells lenders your financial projections, as well as the collateral that will back the loan.
Business plans can be hard to create. If you find yourself staring at a blank Word document for hours and struggling to come up with words, then check out Asphalt Kingdom's guide to creating one.
Equity financing can be a good option for aspiring sealcoating business owners
Photo by Mikhail Nilov via Pexels
If asking for a loan from family, friends, and traditional lenders is out of the question, then you might want to explore equity financing.
Equity financing allows business owners to finance their venture using individual investors' or an organization's money. The funding can come from individual investors or from crowdfunding.
Startup capital can also come from angel investors and venture capitalists. (Keep in mind that some types of equity financing are available only to startups in the tech industry.)
But there's a catch.
Unlike conventional debt financing (funding through family and friends, loans from banks and credit unions), the investor or organization that funded your business gets to acquire a percentage of the ownership interest.
You don't have to pay the investor back. But they get a share in your business in the hope that they will get a return on their investment in the future. Any profits your business generates will have to be shared between you and the investors.
Equity financing is also a viable path to funding for those who have poor credit.
But since investors own shares in your business, you don't have 100% control of decision-making and operation. This can be a source of conflict between you and your investors.
Financing with bad credit? Yes, it's possible
Applying for a loan with banks and other traditional lenders? If you have good credit, then getting approved for this kind of loan will be a breeze.
But the same could not be said for aspiring entrepreneurs with poor credit.
So what's the next best option for you to fund your sealcoating business (if you have poor credit)?
But hold your horses. 'No-credit check' doesn't mean the lender doesn't have requirements for loan eligibility. For example, most lenders require your asphalt business to be operational for a year or two in order to qualify for a loan. And in some cases, even though you have bad credit, you cannot be in bankruptcy, tax liens, or foreclosure. Other lenders also require your business to have a set minimum annual revenue to qualify.
Do you have questions about asphalt maintenance equipment financing? Are you interested in purchasing crack filling or pothole patching equipment with the help of our financing partners?
Give us a call at 1-866-399-5562, and our asphalt experts will help you get started. You can also comment below if you need help setting up your asphalt business.